Toyota Motor Sales U. Inc. v. Superior Court

• Decision Date: 22 May 1990
• Docket Number: No. B047423,B047423
• Court: California Court of Appeals Court of Appeals
• Parties: TOYOTA MOTOR SALES U.S.A., INC., and Toyota Motor Distributors, Inc., Petitioners, v. SUPERIOR COURT for the County of Los Angeles, Respondent, Meichung Tang LEE, Yang Hai Lee and Numero Uno # 12, Real Parties in Interest.

Page 647

269 Cal.Rptr. 647

220 Cal.App.3d 864

TOYOTA MOTOR SALES U.S.A., INC., and Toyota Motor Distributors, Inc., Petitioners, v. SUPERIOR COURT for the County of Los Angeles, Respondent Meichung Tang LEE, Yang Hai Lee and Numero Uno # 12, Real Parties in Interest.

No. B047423.

Court of Appeal, Second District, Division 3, California.

May 22, 1990.

As Modified June 5, 1990.

Meyers, Bianchi & McConnell, Martin E. Pulverman, Ventura, for petitioners.

No appearance for respondent.

Vars, Pave, McCord & Freedman, Encino, J. Patrick Jacobs, Granada Hills, for real parties in interest.

CROSKEY, Associate Justice.

Petitioner, Toyota Motor Sales Inc. ("Toyota") seeks a writ of mandate directing the respondent court to vacate its order finding in good faith (Code Civ.Proc., § 877.6) ¹ a settlement between the plaintiff and the defendants Numero Uno No. 12, Yang Hai Lee and Meichung Tang Lee (collectively "Lee"). As it appears from this record that the trial court's ruling was based entirely on a conclusion regarding Lee's potential liability for plaintiff's injuries which is not supported by substantial evidence, we grant the writ.

FACTUAL AND PROCEDURAL BACKGROUND

At least for purposes of the matter before us, there is no real dispute as to the relevant facts. The record presented by the parties reflects that this case arises from a rear-end automobile accident which occurred on August 28, 1987 in the city of Torrance, California. The defendant Christopher Heard ("Heard"), while delivering a pizza from Numero Uno No. 12, a pizza franchise owned by Lee, so operated his vehicle as to cause it to collide with the rear of plaintiff's vehicle. As a result, plaintiff sustained damages which included $13,000 in medical expenses and $900 in property damage.

On July 8, 1988, plaintiff filed suit against Lee, Heard and Toyota. She alleged that Heard was negligent in the operation of the vehicle and that Lee, as his employer, was vicariously liable under the doctrine of respondeat superior. The cause of action against Toyota alleged that it had defectively designed the seat belt installed in plaintiff's vehicle and that the belt's failure upon impact had contributed to her injuries. ²

Plaintiff made a demand upon the defendants for $500,000 to settle the entire case. Subsequently, Heard entered into a separate settlement with plaintiff for $100,000 which the court, on August 10, 1989, found to be in good faith within the meaning of section 877.6. The evidence in support of that determination included the fact that Heard was a 21 year old student with few, if any, assets other than coverage for his car under his father's liability policy. The amount paid in settlement represented the full policy limits. Toyota did not object to the trial court's good faith determination with respect to this settlement.

Plaintiff then entered into a separate settlement with Lee in consideration of the payment of the sum of $15,000 which represented the full amount provided by Lee's liability policy. Over Toyota's objection the trial court found this settlement to be in good faith. ³ Based thereon, Toyota's cross-complaint against Lee for comparative equitable indemnity was dismissed. Toyota then filed a timely petition for a writ of mandate.

It is clear from a review of the record, that the good faith determination made by the trial court was based on its conclusion that Heard was not an employee of Lee, but rather was an independent contractor. ⁴ On that assumption Lee would have no liability to plaintiff, as the only theory against Lee asserted by plaintiff was based upon the doctrine of respondeat superior. There was no claim that Lee was independently negligent in hiring or using Heard's delivery services. In such circumstances, a settlement of $15,000 would clearly justify a finding that it was made in good faith. On the other hand, if Heard was an employee of Lee, acting in the course and scope of his employment at the time of the accident, then Lee might well be exposed to the potential of unlimited liability and the question of good faith would depend upon the trial court's evaluation of other factors (e.g., plaintiff's probable recovery and the extent of Lee's wealth) which were not reached or considered by the court. ⁵

ISSUE PRESENTED

Did the trial court abuse its discretion in finding that the settlement was in good faith? In light of the court's stated basis for its ruling, the answer to this question turns upon whether there was sufficient evidence upon which the court, in the exercise of its discretion, could have concluded that at trial the court might find that Heard was an independent contractor rather than Lee's employee.

DISCUSSION

The determination as to whether a settlement is in good faith is a matter left to the discretion of the trial court. (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 502, 213 Cal.Rptr. 256, 698 P.2d 159 ("Tech-Bilt").) "The concept of judicial discretion is difficult to define with precision. In the past [the Supreme Court has] described it as 'the sound judgment of the court, to be exercised according to the rules of law.' (Lent v. Tillson, 72 Cal. 404, 422 ....) More recently [the court] said ... that the term judicial discretion 'implies absence of arbitrary determination, capricious disposition or whimsical thinking.' (In re Cortez, 6 Cal.3d 78, 85 [98 Cal.Rptr. 307, 490 P.2d 819]....) Moreover, discretion is abused whenever the court exceeds the bounds of reason, all of the circumstances being considered. [Citations.]" (People v. Giminez (1975) 14 Cal.3d 68, 72, 120 Cal.Rptr. 577, 534 P.2d 65.)

The exercise of that discretion in the making of a determination as to "good faith" under section 877.6, "[L]ike other judicial determinations, ... involves the resolution of a factual issue which, consistent with time-honored rules of appellate review, must be upheld if supported by substantial evidence. [Citations.]" (Barajas v. USA Petroleum Corp. (1986) 184 Cal.App.3d 974, 987, 229 Cal.Rptr. 513.) A determination as to the good faith of a settlement, within the meaning of section 877.6, necessarily requires the trial court to examine and weigh a number of relevant factors, ⁶ one of the most important of which is the settling party's proportionate liability. In making such examination, the court must look at the state of the evidence as it exists at the time the motion for a good faith determination is heard. (Torres v. Union Pacific R.R. Co. (1984) 157 Cal.App.3d 499, 509, 203 Cal.Rptr. 825; Tech-Bilt, supra, 38 Cal.3d at p. 499, 213 Cal.Rptr. 256, 698 P.2d 159.) If, as we will find the case to be here, there is no substantial evidence to support a critical assumption as to the nature and extent of a settling defendant's liability, then a determination of good faith based upon such assumption is an abuse of discretion.

As we have indicated, the critical and threshold question, upon which the trial court's factual determination of good faith depends, relates to the employment status of Heard. If the evidence on this point is such that there can be but one conclusion and that is that Heard was Lee's employee, then the ultimate factual issue of good faith must be made in light of Lee's exposure to unlimited liability. This obviously did not occur here. Indeed, the trial court's determination of good faith was based on exactly the opposite factual assumption.

Substantial evidence, of course, is not synonymous with "any" evidence, but is evidence which is of ponderable legal significance. It must be "reasonable in nature, credible, and of solid value; it must actually be 'substantial' proof of the essentials which the law requires in a particular case." (Estate of Teed (1952) 112 Cal.App.2d 638, 644, 247 P.2d 54; Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 51, 248 Cal.Rptr. 217.) Thus, the focus is on the quality, not the quantity of the evidence. Very little solid evidence may be "substantial", while a lot of extremely weak evidence might be "insubstantitial." (See Eisenberg, Horvitz & Wiener, Cal.Prac.Guide: Civil Appeals and Writs (1989) § 8.50, pp. 8-12.)

Where conflicting inferences may reasonably be drawn, the determination of the trial court will be accepted on appeal even though a contrary determination would likewise be upheld. (2 Witkin, Summary of Cal.Law (9th ed. 1987) Agency and Employment, § 24, p. 39; Washko v. Stewart (1937) 20 Cal.App.2d 347, 348, 67 P.2d 144.) However, where the facts are undisputed, the issue is one of law and the appellate court is free to reach its own legal conclusion from such facts (9 Witkin, Cal.Procedure (3d ed. 1985) Appeal, §§ 288-290, pp. 300-303; Mantonya v. Bratlie (1948) 33 Cal.2d 120, 127-129, 199 P.2d 677; Isenberg v. California Emp. Stab. Com. (1947) 30 Cal.2d 34, 40, 180 P.2d 11; Baugh v. Rogers (1944) 24 Cal.2d 200, 206, 148 P.2d 633.) It appears that this latter rule is applicable here as there is no dispute as to the facts; the parties have simply emphasized different factors.

The evidence, relevant to the legal status of Heard, offered by Lee and apparently relied upon by the court, was that he (1) provided his own car, expenses and insurance, (2) was paid on a commission (10%) basis for each delivery, (3) agreed to pay his own payroll (FICA) and income taxes, (4) agreed to provide his own worker's compensation coverage and (5) had signed a written agreement with Lee which acknowledged his status as an "independent contractor." ⁷ Lee, in accordance with the agreement, paid Heard for his services each day in cash an amount equal to 10% of the total charges for the pizzas delivered.

The evidence emphasized by Toyota demonstrated that Heard (1) was requested by Lee to work between 5:00 p.m. and 9:00 p.m. each day, (2) delivered pizzas to Lee's customers who had called in orders, (3) delivered pizzas at the times and to the customers and in the quantities as directed by Lee, (4)...